Currently, the limited liability company model is very popular. Business owners choose this type of company due to its many advantages, the most notable being the low risk for business owners and investors, as they are only liable for the extent of their capital contributions. Despite their limited liability, the company must operate effectively and in accordance with the law, the organizational management of the business cannot be overlooked. Therefore, the article below will provide readers with guidelines on how to legally organize and manage an limited liability company, avoiding violations and unnecessary losses during the management and operation of the organization.
1. Choosing the Type of Limited Liability Company Model
According to the Law on Enterprises 2020 (LOE), there are currently two types of Limited Liability Company (LLC) models: single-member LLC and multiple-member LLC
Below is a comparison table differences between the two models:
| Single-Member LLC | Multiple-Member LLC | |
| Members | 1 organization or 1 individual | organizations or individuals |
| Number of Members | 01 member | 02-50 members |
| Model | – If owned by an organization, there are 2 models:
Model 1: The company’s president, Director/General Director. Model 2: Board of Members and the Director/General Director. |
1 model, including: Board of Members, President of the Board of Members, Director/General Director.
The Board of Controllers must be established if it is a state-owned enterprise. |
Depending on the business owner’s needs and goals, they can choose an appropriate LLC model.
2. How to Legally Organize and Manage an LLC
a. Single-member LLC
– If owned by an organization, there are 2 models:
Model 1: The company’s President, Director/General Director.
Model 2: Board of Members, Director/General Director.
– The Board of Controllers must be established if it is a state-owned enterprise.
– If owned by an individual, there is 1 model: The company’s president, Director/General Director.
Depending on whether the owner is an individual or an organization and the business’s needs, the model of the single-member LLC is chosen. Below is a general overview of the positions in a single-member LLC:
| Organizational Structure | Rights and Duties | |
| Owner | An individual or an organization. | Article 76, 77, 78, 83, 84 LOE. |
| The company’s president | be designated by the company’s owner | Perform the owner’s rights and obligations in the owner’s name; perform the company’s rights and obligations in the company’s name, except the rights and obligations of the Director/General Director; take responsibility to the law and the owner for his/her performance as prescribed by the company’s charter, this Law and relevant laws.
In addition, the company’s president has rights and duties with the company’s charter and article 83, 84 LOE |
| The Board of members | The Board of Members shall have 03 – 07 members. The members shall be designated and dismissed by the owner with a 5-year term of office.
The President of the Board of Members can be designated by the company’s owner or elected by the members of the Board of Members based on the majority principle, following the procedures in the company’s Charter.
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The Board of Members shall perform the owner’s rights and obligations in the owner’s name; perform the company’s rights and obligations in the company’s name, except the rights and obligations of the Director/General Director; take responsibility to the law and the owner for their performance as prescribed by the company’s charter, this Law and relevant laws.
In addition, it has rights and duties with the company’s charter and article 56, 57, 80, 83, 84 LOE |
| Director/ General Director | The Board of Members or the company’s President shall designate or hire the Director/General Director within a term of office not exceeding 05 years.
The President of the Board of Members, another member of the Board of Members or the company’s President may concurrently hold the position of Director/General Director unless otherwise prescribed by law or the company’s charter. |
Manage the company’s everyday business.
The Director/General Director shall be responsible for the law and the Board of Members or the company’s President for his/her performance. In addition, it has rights and duties with the company’ s charter and article 82, 83, 84 LOE |
| The Board of Controllers | The Board of Controllers shall have 1 – 5 Controllers.
The term of office of a controller shall not exceed 05 years and without term limit. In case the Board of Controllers only has 01 controller, he/she shall be the Chief Controller and shall satisfy corresponding conditions. The Chief Controller and Controllers shall satisfy the requirements specified in Clause 2 Article 168 and Article 169 LOE
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Clause 3, Article 65 LOE
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b. Multiple-Member LLC
According to Article 54 of the LOE, a multiple-member LLC will have the following organizational structure:
- Board of Members
- President of the Board of Members
- Director/General Director
- The Board of Controllers: if it is a state-owned enterprise as per point b, clause 1, Article 88 and the subsidiary of a state-owned enterprise under clause 1, Article 88 LOE
- A company shall have at least one legal representative who holds the title of President of the Board of Members, Director/General Director. Unless otherwise prescribed by the company’s charter, the President of the Board of Members shall be the company’s legal representative.
| Members | Organizational Structure | Rights and Duties |
| The Board of Members | The supreme governing body of the company.
Consists of all members that are individuals and authorized representatives of members that are organizations. At least one meeting shall be held per year |
Clause 2, Article 55 LOE |
| President of the Board of Members | The Board of Members shall elect a member as the President, who may concurrently hold the position of Director/General Director of the company. | Articles 56, 66, 71 LOE |
| Director/General Director | the person who manages the company’s everyday business operation and is responsible to the Board of Members for his/her performance. | Articles 63, 66, 71 LOE |
| The Board of Controllers | The Board of Controllers shall have 1 – 5 Controllers.
The term of office of a controller shall not exceed 05 years and without term limit. In case the Board of Controllers only has 01 controller, he/she shall be the Chief Controller and shall satisfy corresponding conditions. The Chief Controller and Controllers shall satisfy the requirements specified in Clause 2 Article 168 and Article 169 LOE
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Clause 3, Article 65 LOE
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| Legal representatives | The President of the Board of Members, the Director/General Director.
If the company’s charter does not specify, the President of the Board of Members will concurrently hold this position. |
Article 71 LOE |
Thus, depending on the LLC model, the company will organize and manage itself in accordance with the actual situation and the legal requirements of the current LOE. Each position will have different organizational rules, standards, conditions for election, as well as varying rights and duties. Companies need to closely follow current legal provisions, especially the LOE to ensure an effective, safe and sustainable organizational structure.
